Only option for Nandan Nilekani is to revamp the board: Claude Smadja

Claude Smadja has seen Infosys go through several transformations for over a decade as a board member of the company. He was in the board of Infosys between 2001 and 2010.TV Mahalingam | ET Bureau | August 28, 2017, 11:24 IST

In an interview with ET’s TV Mahalingam, Switzerland-based Smadja, who runs his own strategic advisory firm, spoke about the problems Infosys faces, how things could have been handled differently, and the way ahead for the company.

Edited excerpts:

What was your experience on the Infosys board? What’s your take on the happenings at Infosys?

There was this extreme attention for every single aspect of compliance in terms of corporate governance. On many occasions, some of us as independent non-executive directors made a number of suggestions to improve some elements of corporate governance and expand a few practices.

And every time, the decisions were welcomed and followed.

Amongst the founders there was this notion that Infosys had to be whiter than white in terms of corporate governance. And, of course, the founders left the board and a new management took over. My observations while talking to certain people during my regular visits to India was that Murthy – and not just Murthy – had genuine concerns that corporate governance was not as tight.

Rightly or wrongly, the whole issue of the departure of two top executives in conditions that are not fully clarified created a feeling that some ‘alarm bells’ had to be rung. For reasons which might have been purely psychological – but I wouldn’t speculate on that – the board might not have been fully responsive to the concerns that were expressed, and then we had this kind of escalation between the board and Murthy.

When the board took on Murthy for Vishal Sikka’s resignation, I thought it was a bit unfair. At least to my knowledge, in all his public pronouncements Murthy had criticised the board on corporate governance, but I have not seen any public statement from Murthy criticising Sikka.

At the same time, I understand that Sikka felt more and more in a difficult situation. The deadlock which was created and the lack of good accommodation between the board and the group of founders led to a situation which really threatened the sustainability of Infosys. In a way, it was not possible for the board to continue functioning.

The solution proposed that Sikka would resign as CEO but remain as executive vice-chairman was not optimum, creating new uncertainties, with the company functioning for seven months with a besieged board and a CEO whom all knew would be leaving by March.

The appointment of Nandan Nilekani in the current situation is the best possible solution: he's respected inside and outside the company, and he has the stature of a global business leader.

Is the letter from the board criticizing Murthy an error?

It was a big error. Because when you had, for instance, the documents exonerating the conditions of the departure of the two executives…the refusal of the board to publish even some edited elements of the report.

Maybe, there was no specific reason and it was a psychological reaction – I'm not saying there was anything to hide but it was a mistake. It was the moment when may be an accommodation with the help of a third party could have stopped the situation from deteriorating.

Some board members have quit. What will happen now?

The only option for Nandan is to revamp the board. Maybe, he will want to keep some members off the board, but the logical step in this difficult situation is to have a board with whom he can work in full confidence. This, of course, doesn't mean Nandan would want a rubber stamp board; he'd want a board where the discussions will not be clouded with any kind of legacy.

The founders tried to let go of board control completely but that hasn't worked. Should they go for an insider as CEO?

With respect to the selection of CEO, there should be an open, 360-degree approach looking for the next CEO. Whether it is an outsider or somebody who has been in Infosys, the important questions are what kind of profile do you expect, what kind of experience you want, what kind of capabilities you are looking for and what kind of stature would you expect. I would not look at this question as an “insider” or “outsider”.

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